Question 1

A firm that shuts down temporarily has to pay

Accepted Answer

A)   its variable costs but not its fixed costs.
B)   its fixed costs but not its variable costs.
C)   both its variable costs and its fixed costs.
D)   neither its variable costs nor its fixed costs.E) B) and C)
F) A) and D)

Question 2

Figure 14-4
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-4. When price rises from P2 to P3, the firm finds that

Accepted Answer

A)   marginal cost exceeds marginal revenue at a production level of Q2.
B)   if it produces at output level Q3 it will earn a positive profit.
C)   expanding output to Q4 would leave the firm with losses.
D)   it could increase profits by lowering output from Q3 to Q2.E) B) and D)
F) B) and C)

Question 3

Firms that operate in perfectly competitive markets try to

Accepted Answer

A)   maximize revenues.
B)   maximize profits.
C)   equate marginal revenue with average total cost.
D)   All of the above are correct.E) A) and B)
F) None of the above

Question 4

Suppose that a firm operating in perfectly competitive market sells 300 units of output at a price of $3 each. Which of the following statements is correct? i)  Marginal revenue equals $3.
Ii)  Average revenue equals $100.
Iii)  Total revenue equals $300.

Accepted Answer

A)   i)  only
B)   iii)  only
C)   i)  and ii)  only
D)   i) , ii) , and iii) E) None of the above
F) A) and B)

Question 5

Scenario 14-4
The information below applies to a competitive firm that sells its output for $40 per unit.
• When the firm produces and sells 150 units of output, its average total cost is $24.50.
• When the firm produces and sells 151 units of output, its average total cost is $24.55.
-Refer to Scenario 14-4. Let Q represent the quantity of output. Which of the following magnitudes has the same value at Q = 150 and at Q = 151?

Accepted Answer

A)   average fixed cost
B)   average revenue
C)   total cost
D)   total revenueE) A) and B)
F) None of the above

Question 6

A seller in a competitive market

Accepted Answer

A)   can sell all he wants at the going price, so he has little reason to charge less.
B)   will lose all his customers to other sellers if he raises his price.
C)   considers the market price to be a "take it or leave it" price.
D)   All of the above are correct.E) A) and B)
F) B) and D)

Question 7

When a resource used in the production of a good sold in a competitive market is available in only limited quantities, the long-run supply curve is likely to be upward sloping.

Accepted Answer

A) True 
 B)False

Question 8

Suppose a competitive market has a horizontal long-run supply curve and is in long-run equilibrium. If demand decreases, we can be certain that in the short-run,

Accepted Answer

A)   at least some firms will shut down.
B)   price will fall below marginal cost for some firms.
C)   price will fall below average total cost for some firms.
D)   at least some firms will enter the industry.E) A) and B)
F) C) and D)

Question 9

For a certain firm, the 100th unit of output that the firm produces has a marginal revenue of $7 and a marginal cost of $10. It follows that the

Accepted Answer

A)   production of the 100th unit of output increases the firm's profit by $3.
B)   production of the 100th unit of output increases the firm's average total cost by $7.
C)   firm's profit-maximizing level of output is less than 100 units.
D)   production of the101st unit of output must increase the firm's profit by more than $3.E) B) and D)
F) All of the above

Question 10

Firms operating in perfectly competitive markets try to maximize profits.

Accepted Answer

A) True 
 B)False

Question 11

Table 14-6
The following table presents cost and revenue information for a firm operating in a competitive industry.
 
-Refer to Table 14-6. What is the total revenue from selling 4 units?

Accepted Answer

A)   $120
B)   $257
C)   $317
D)   $480E) None of the above
F) A) and D)

Question 12

Suppose you value a special watch at $100. You purchase it for $75. On your way home from class one day, you lose the watch. The store is still selling the same watch, but the price has risen to $85. Assume that losing the watch has not altered how you value it. What should you do?

Accepted Answer

A)   Pay the $85 to buy the watch.
B)   Wait to see if the watch goes on sale. If the price drops to $75 or less, buy the watch.
C)   Wait to see if the watch goes on sale. If the price drops to $25 or less, buy the watch.
D)   Do not buy the watch.E) A) and B)
F) A) and D)

Question 13

If a firm in a competitive market doubles its number of units sold, total revenue for the firm will

Accepted Answer

A)   more than double.
B)   double.
C)   increase but by less than double.
D)   may increase or decrease depending on the price elasticity of demand.E) All of the above
F) None of the above

Question 14

In the short run, there are 500 identical firms in a competitive market. The firms do not use any resources that are available in limited quantities, and each of them has the following cost structure:  Which of the following is a point on the long-run supply curve?

Accepted Answer

A)   P=$10, Q=500.
B)   P=$6, Q=1,000.
C)   P=$5, Q=500.
D)   P=$5, Q=1,500.E) A) and B)
F) C) and D)

Question 15

A popular resort restaurant will maximize profits if it chooses to stay open during the less­crowded "off season" when its total revenues exceed its fixed costs.

Accepted Answer

A) True 
 B)False

Question 16

In the short run for a particular market, there are 5,000 firms. Each firm has a marginal cost of $7 when it produces 200 units of output. One point on the market supply curve is

Accepted Answer

A)   quantity = 5,000; price = $7.
B)   quantity = 35,000 price = $35,000.
C)   quantity = 1,000,000, price = $7.
D)   quantity = 1,000,000, price = $35,000.E) B) and C)
F) None of the above

Question 17

In a competitive market, the actions of any single buyer or seller will

Accepted Answer

A)   discourage entry by competitors.
B)   influence the profits of other firms in the market.
C)   have a negligible impact on the market price.
D)   None of the above is correct.E) C) and D)
F) A) and D)

Question 18

Figure 14-6
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-6. When market price is P3, a profit-maximizing firm's profit

Accepted Answer

A)   can be represented by the area P3 × Q3.
B)   can be represented by the area P3 × Q2.
C)   can be represented by the area P3-P2)  × Q3.
D)   is zero.E) C) and D)
F) A) and C)

Question 19

Table 14-3
The table represents a demand curve faced by a firm in a competitive market.
 
-Refer to Table 14-3. For this firm, the price is

Accepted Answer

A)   $39.
B)   $26.
C)   $13.
D)   $0.E) A) and B)
F) All of the above

Question 20

Cold Duck Airlines flies between Tacoma and Portland. The company leases planes on a year-long contract at a cost that averages $600 per flight. Other costs fuel, flight attendants, etc.)  amount to $550 per flight. Currently, Cold Duck's revenues are $1,000 per flight. All prices and costs are expected to continue at their present levels. If it wants to maximize profit, Cold Duck Airlines should

Accepted Answer

A)   drop the flight immediately.
B)   continue the flight.
C)   continue flying until the lease expires and then drop the run.
D)   drop the flight now but renew the lease if conditions improve.E) A) and B)
F) B) and D)

Exam 13: Firms in Competitive Markets

When a resource used in the production of a good sold in a competitive market is available in only limited quantities, the long-run supply curve is likely to be upward sloping.

Correct Answer
verified

In a competitive market, the actions of any single buyer or seller will

Correct Answer
verified

Firms operating in perfectly competitive markets try to maximize profits.

Correct Answer
verified

Suppose that a firm operating in perfectly competitive market sells 300 units of output at a price of $3 each. Which of the following statements is correct? i) Marginal revenue equals $3. Ii) Average revenue equals $100. Iii) Total revenue equals $300.

Correct Answer
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Table 14-6 The following table presents cost and revenue information for a firm operating in a competitive industry. -Refer to Table 14-6. What is the total revenue from selling 4 units?

Correct Answer
verified

Table 14-3 The table represents a demand curve faced by a firm in a competitive market. -Refer to Table 14-3. For this firm, the price is

Correct Answer
verified

Suppose you value a special watch at $100. You purchase it for $75. On your way home from class one day, you lose the watch. The store is still selling the same watch, but the price has risen to $85. Assume that losing the watch has not altered how you value it. What should you do?

Correct Answer
verified

Suppose a competitive market has a horizontal long-run supply curve and is in long-run equilibrium. If demand decreases, we can be certain that in the short-run,

Correct Answer
verified

A popular resort restaurant will maximize profits if it chooses to stay open during the lesscrowded "off season" when its total revenues exceed its fixed costs.

Correct Answer
verified

If a firm in a competitive market doubles its number of units sold, total revenue for the firm will

Correct Answer
verified

A seller in a competitive market

Correct Answer
verified

Figure 14-4 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-4. When price rises from P2 to P3, the firm finds that

Correct Answer
verified

For a certain firm, the 100th unit of output that the firm produces has a marginal revenue of $7 and a marginal cost of $10. It follows that the

Correct Answer
verified

Firms that operate in perfectly competitive markets try to

Correct Answer
verified

A firm that shuts down temporarily has to pay

Correct Answer
verified

In the short run for a particular market, there are 5,000 firms. Each firm has a marginal cost of $7 when it produces 200 units of output. One point on the market supply curve is

Correct Answer
verified

Figure 14-6 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-6. When market price is P3, a profit-maximizing firm's profit

Correct Answer
verified

Correct Answer
verified

In the short run, there are 500 identical firms in a competitive market. The firms do not use any resources that are available in limited quantities, and each of them has the following cost structure: Which of the following is a point on the long-run supply curve?

Correct Answer
verified

Correct Answer
verified

Exam 13: Firms in Competitive Markets

When a resource used in the production of a good sold in a competitive market is available in only limited quantities, the long-run supply curve is likely to be upward sloping.

Correct AnswerverifiedShow Answer

In a competitive market, the actions of any single buyer or seller will

Correct AnswerverifiedShow Answer

Firms operating in perfectly competitive markets try to maximize profits.

Correct AnswerverifiedShow Answer

Suppose that a firm operating in perfectly competitive market sells 300 units of output at a price of $3 each. Which of the following statements is correct? i) Marginal revenue equals $3. Ii) Average revenue equals $100. Iii) Total revenue equals $300.

Correct AnswerverifiedShow Answer

Table 14-6 The following table presents cost and revenue information for a firm operating in a competitive industry. -Refer to Table 14-6. What is the total revenue from selling 4 units?

Correct AnswerverifiedShow Answer

Table 14-3 The table represents a demand curve faced by a firm in a competitive market. -Refer to Table 14-3. For this firm, the price is

Correct AnswerverifiedShow Answer

Suppose you value a special watch at $100. You purchase it for $75. On your way home from class one day, you lose the watch. The store is still selling the same watch, but the price has risen to $85. Assume that losing the watch has not altered how you value it. What should you do?

Correct AnswerverifiedShow Answer

Suppose a competitive market has a horizontal long-run supply curve and is in long-run equilibrium. If demand decreases, we can be certain that in the short-run,

Correct AnswerverifiedShow Answer

A popular resort restaurant will maximize profits if it chooses to stay open during the less­crowded "off season" when its total revenues exceed its fixed costs.

Correct AnswerverifiedShow Answer

If a firm in a competitive market doubles its number of units sold, total revenue for the firm will

Correct AnswerverifiedShow Answer

A seller in a competitive market

Correct AnswerverifiedShow Answer

Figure 14-4 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-4. When price rises from P2 to P3, the firm finds that

Correct AnswerverifiedShow Answer

For a certain firm, the 100th unit of output that the firm produces has a marginal revenue of $7 and a marginal cost of $10. It follows that the

Correct AnswerverifiedShow Answer

Firms that operate in perfectly competitive markets try to

Correct AnswerverifiedShow Answer

A firm that shuts down temporarily has to pay

Correct AnswerverifiedShow Answer

In the short run for a particular market, there are 5,000 firms. Each firm has a marginal cost of $7 when it produces 200 units of output. One point on the market supply curve is

Correct AnswerverifiedShow Answer

Figure 14-6 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-6. When market price is P3, a profit-maximizing firm's profit

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In the short run, there are 500 identical firms in a competitive market. The firms do not use any resources that are available in limited quantities, and each of them has the following cost structure: Which of the following is a point on the long-run supply curve?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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Correct Answer
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Correct Answer
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Correct Answer
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A popular resort restaurant will maximize profits if it chooses to stay open during the lesscrowded "off season" when its total revenues exceed its fixed costs.

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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